Employers Say They Will Keep Key ACA Provisions

On the left and right of the political spectrum there is a lot of enthusiasm for protecting certain key provisions of the Affordable Care Act. 

New research from Willis Towers Watson suggests that, as Congress continues to consider repealing and replacing the Affordable Care Act (ACA), employers expect to retain some of the law’s popular provisions, “even if they are not required to by a new law.”

Survey data provided by the firm shows approximately one-third of employers are “not sure of future plans,” but more employers plan to keep popular provisions than make changes.

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“For example, if unlimited lifetime benefits are repealed, employers are more than three-times more likely to keep them in place than they are to reinstitute lifetime dollar limits, at 50% versus 15%, respectively,” Willis Towers Watson reports. “In addition, if contraceptive care at a 100% benefit is repealed, employers are nearly six times more likely to maintain coverage at that level than they are to reduce it, at 59% versus 11%.”

The findings come from the Willis Towers Watson 2017 Emerging Trends in Health Survey, which polled 666 U.S. employers. The survey also found that if the age 26 dependent coverage rule were to be repealed “more than twice the number of employers would keep the eligibility age at 26 than lower it: 48% versus 22%.”

“Employers are more likely to retain some of the popular ACA benefit provisions because of their positive impact on employee engagement and the potential for changes to be viewed negatively in the context of overall rewards,” observes Julie Stone, a national health care practice leader at Willis Towers Watson. “As we see an increased focus on employee productivity, employers will be careful about the implications of change, not just from a dollars and cents perspective, but in terms of employee perceptions.”

NEXT: Employees Expect Generous Coverage 

According to Willis Towers Watson, employers are also unlikely to make changes to their broader health care strategy if certain provisions of the ACA that have been unpopular with employers are repealed.

“For example, just 6% of employers said they are very likely and 13% said they are somewhat likely to make changes if the employer mandate is repealed,” the survey data shows. “The employer mandate requires employers to offer affordable, minimum-value coverage to full-time employees or pay a penalty.”

If restrictions on offering stand-alone or premium health reimbursement accounts for active employees are eliminated, just 4% of employers are "very likely" and 13% are "somewhat likely" to make changes to their current health care strategy, Willis Towers Watson finds. In addition, even if limits are placed on the dollar amount of employer-sponsored premiums that are exempt from federal income and payroll taxes, “relatively few employers would make broad changes.”

“Just 16% of employers are very likely and 31% are somewhat likely to make changes if the tax exclusion is capped,” data shows.

“Employers are confident they'll be providing health care for the near future and are hesitant to commit to changes until they see the big picture,” Stone concludes. “Whatever provisions a new law might include, most employers will stay on their current path to build a high-performing health care program. Improving plan design value and creating program efficiencies will remain core components of an effective long-term health care strategy.”

Retirement Plans Not Out of the Woods Yet on Tax Reform

Congress is still considering the idea of making defined contribution (DC) deferrals after-tax (Roth) instead of pre-tax.

While President Donald Trump’s tax plans don’t seem to include proposals affecting retirement accounts, we are not out of the woods yet, according to Will Hansen, senior vice president of retirement and compensation policy at the ERISA Industry Committee (ERIC), based in Washington, D.C.

Congress has proposals on the table that directly impact the tax treatment of retirement plans, including proposals to make defined contribution (DC) deferrals after-tax (Roth) instead of pre-tax. “This is something they are reviewing and potentially including in their first iteration of a tax-reform plan,” Hansen says.

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Hansen has heard in meetings with Congressional staff that, along with the Roth proposal, Congress has proposed to provide what Hansen calls “sweeteners”—an increase in deferral limits, changing the saver’s credit, using e-disclosures and encouraging employers to provide student loan repayment programs.

He’s also heard there are discussions around making all deferrals Roth deferrals, or just 25%, or making them 50% pre-tax and 50% after-tax. “The purpose behind that is to raise revenue to pay for other non-retirement related items in the tax code,” Hansen says. “Retirement is often a target if Congress needs money.”

Hansen says it will be interesting to see DC plan participants’ reaction to a reduction in pre-tax contributions. “Employers will need to review whether they see a drastic drop in participation and contributions. If Congress moves deferrals to 100% Roth, I think that drop would be huge and a detriment to the retirement savings of Americans,” he states. He adds that moving to Roth deferrals takes away flexibility from employees and is a massive shift in the way they save for retirement.

If this happens, how will employers be able to continue to provide competitive benefit packages? Hansen notes that in health care debates, there are proposals to expand deferrals into health savings accounts (HSAs), and penalties for non-medical spending of these accounts go away when a participant turns age 65. “So will HSAs replace 401(k)s as a retirement savings vehicle?” he queries.

Retirement plans are also not out of woods yet because the Trump administration can put forward any sort of proposal they want without having to face the reality that Congress wants tax reform to be revenue-neutral, Hansen notes. “We need to fight to protect pre-tax deferral limits on DC plans,” he says.

In a statement, Annette Guarisco Fildes, president and CEO of ERIC, said, “While ERIC appreciates the Administration supporting the preservation of the pre-tax treatment of contributions to retirement plans, we are concerned with Congressional proposals that call for dramatic changes to the retirement system in America, such as replacing pre-tax contributions with after-tax Roth contributions. A drastic shift to Roth contributions could undermine the entire retirement system in this country and undo the progress that has been made through widely favored pre-tax [DC] plans.”

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